The Pensions Regulator has set out how it will use its new powers to investigate and punish individuals who put savers’ money at risk.
In documents published today (March 11) TPR warned its new powers would strengthen punishment for reckless behaviour towards savers and said they should act as a deterrent for anyone intending to cause harm.
Under the new rules TPR will be able to prosecute anyone in connection with the offence and will no longer be bound by limitation periods.
The Pension Schemes Act 2021 gave TPR new powers to crack down on two new criminal offences: the offence of avoiding employer debt and the offence of risking savers' future pensions.
According to TPR, a person is in breach of the first offence if they prevent the scheme from recovering any part of the debt that is due from the employer without a "reasonable excuse".
The second offence is breached if someone acts in a way that affects the likelihood of savers receiving their pensions without a reasonable excuse.
At present, TPR can issue a Contribution Notice to require a person to pay the scheme’s trustees or the Pension Protection Fund.
But whereas a Contribution Notice can only be issued if the individual was the scheme’s sponsoring employer or connected with the employer, under the new criminal sanctions, an offence can be committed by anyone other than an insolvency practitioner.
There is also a statutory limitation period on TPR’s Contribution Notice power of six years, but there is no limitation period with the new criminal sanctions.
David Fairs, TPR’s executive director of regulatory policy, said: “Our new criminal offence powers are part of a strong package of measures which enhance our existing avoidance powers, supporting our objectives to protect pension savers.
“The intent of the new criminal offences is not to change commercial norms or accepted standards of corporate behaviour.
"Rather it is to tackle the more serious examples of intentional or reckless conduct that puts members’ savings at risk; and strengthen the deterrent and punishment for that behaviour. Our policy is consistent with this intent."
The regulator has outlined scenarios in which it will look to bring cases forward for prosecution.
For example, where:
- the primary purpose of an individual’s actions is to abandon the scheme without “provision of appropriate mitigation”;
- significant financial gains have been unreasonably made to the detriment of the scheme;
- there has been some other unfairness in the treatment of the scheme’ and/or
- the trustees, TPR and/or the PPF have been misled or not appropriately informed.
In the case of proving there was no reasonable excuse for an individual’s action, TPR said the onus will be on the prosecution.
What amounts to a reasonable excuse will depend on the case, but TPR has outlined three factors that will be significant when determining this.
The first is whether the impact on the scheme or the likelihood of full scheme benefits being received was an “incidental consequence”, as opposed to a “fundamentally necessary step”.
Secondly, whether the employer has acted to offset the impact to the scheme and thirdly whether there was a viable alternative which would have avoided or reduced the detrimental impact.